FEDERAL MINE SAFETY AND HEALTH REVIEW COMMISSION

OFFICE OF ADMINISTRATIVE LAW JUDGES

1331 Pennsylvania Avenue, NW, Suite 520N

WASHINGTON, DC 20004

May 28, 2013

ORDER GRANTING RESPONDENT’S MOTION FOR SUMMARY DECISION AND DENYING SECRETARY’S MOTION FOR SUMMARY DECISION.

Procedural History and Summary of Facts

            These dockets are before me on petitions for penalties filed by the Secretary pursuant to Section 105(d) of the Federal Mine Safety and Health Act of 1977, 30 U.S.C. § 815 et seq. (2000) (the “Act”). On March 7, 2013 upon request by counsel, I consolidated these dockets for submission of motions for partial summary decision in accordance with Section 2700.67 of the Federal Mine Safety and Health Review Commission’s Procedural Rules, 30 C.F.R. § 27.00.67. Each of these operators is a subsidiary of Alliance Coal, LLC (“Respondent”) and is located in the Commonwealth of Kentucky.

            Each of these dockets contains violations issued against the operators during regular inspections conducted by a Mine Safety and Health Administration (MSHA) inspector for violations of three mandatory standards involving oil and gas wells located within the coal mine. The predicate standard cited is 30 C.F.R. § 75.1700 which states:

            Each operator of a coal mine shall take reasonable measures to locate oil and gas  wells penetrating coalbeds or any underground area of a coal mine. When located,  such operator shall establish and maintain barriers around such oil and gas wells in accordance with State laws and regulations, except that such barriers shall not be less than 300 feet in diameter, unless the Secretary or his authorized representative permits a lesser barrier consistent with applicable State laws and regulations against hazards for such wells to the miners in such mine, or unless the Secretary or his authorized representative requires a greater barrier where the depth of the mine, other geological conditions, or other factors warrant such a greater barrier.

            The Secretary alleges that in each of these cited mines, the operator mined within the 300 foot barrier without seeking MSHA approval. There are a total of five cited violations of this mandatory standard among these five dockets related to 117 permits issued by the Commonwealth of Kentucky.

            Believing that the bore holes were not either gas or oil wells under Kentucky law, the Respondent did not so label them on the mine maps. This resulted in the issuance of five violations under Section 75.1200 and four violations of Section 75.372. These two closely related mandatory standards require, in relevant part, that the certified mine maps show either producing or abandoned oil and gas wells located within 500 feet of such mine; and, the ventilation maps contain the location of all known oil and gas wells and other drill holes that penetrate the coalbed, respectively. 30 C.F.R. § 75.1200(k) and § 75.372(b)(5).

            The parties have stipulated that the MSHA inspectors relied upon information gathered from the Commonwealth of Kentucky Department for Natural Resources Office of Mine Safety and Licensing to determine that the holes were oil and/or gas wells. They have further stipulated that no advisory statements were provided to these mines that these holes were considered oil or gas wells prior to the issuance of these citations and orders. Based upon information obtained from MSHA’s data retrieval system, each of these mines has been inspected by MSHA since 2006 between 1,127 and 4,358 inspection days after the holes were drilled. If these holes are not considered oil and gas wells, the Secretary agrees that the Respondent’s maps are correct. (Joint Exhibit A.)

            The Joint Stipulations submitted by counsel also provide a chart of each of the wells at issue here listed by mine name, record and permit number. Beside each permit number is the date drilling of the hole commenced, date completed and date plugged, the geological survey designation and whether any production of oil or gas resulted. The earliest one drilled was in 1944 and last one in 1998, the majority of them being drilled between 1960 and 1987. Of the 117 bore holes listed, not one of them produced any oil or gas. All of them were listed as “dry and abandoned” and were plugged the same day drilling was completed or very shortly thereafter. (Joint Exhibit A.)      

            Summary Decision Standards

            Commission Rule 67 sets forth the guidelines for granting summary decision:

(b) A motion for summary decision shall be granted only if the entire record, including the pleadings, depositions, answers to interrogatories, admissions, and affidavits shows:

                        (1) That there is no genuine issue as to any material fact; and

                        (2) That the moving party is entitled to summary decision as a matter of law.

29 C.F.R. §2700.67(b).

            The Commission “has long recognized that [ ] ‘summary decision is an extraordinary procedure,’ and has analogized it to Rule 56 of the Federal Rules of Civil Procedure, under which the Supreme Court has indicated that summary judgment is authorized only ‘upon proper showings of the lack of a genuine, triable issue of material fact.’” Hanson Aggregates New York, Inc., 29 FMSHRC 4, 9 (Jan. 2007)(quoting Energy West Mining Co., 16 FMSHRC 1414, 1419 (July 1994)). In reviewing the record on summary judgment, the court must evaluate the evidence in “the light most favorable to…the party opposing the motion.” Hanson Aggregates at 9 (quoting Poller v. Columbia Broad. Sys., 368 U.S. 464, 473 (1962). Any inferences “drawn from the underlying facts contained in [the] materials [supporting the motion] must be viewed in the light most favorable to the party opposing the motions.’” Hanson Aggregates at 9 (quoting Unites States v. Diebold, Inc., 369 U.S. 654, 655 (1962)).

            The issues presented in this penalty proceeding are whether the bore holes identified by their corresponding permit numbers are oil and gas wells as contemplated within mandatory standard 75.1700, and if so, was Respondent provided fair notice of MSHA’s interpretation of the terms to assess penalties against it.

            The parties have not provided any conflicting material facts which would prevent issuance of summary decision on the issue of fair notice. However, as set forth in more detail below, the issue of whether the bore holes come within the definition of oil and gas wells contemplated by the MSHA regulation is not appropriately decided here by summary decision.

ADDITIONAL FINDINGS OF FACT AND CONCLUSIONS

            Definition of Oil and Gas Wells

            Both parties agree that the definition of oil and gas wells is not defined within the MSHA regulations. They have asked that the terms be defined by me herein. I decline to do so. The Secretary has not provided a proposed definition for the terms while the Respondent suggests MSHA should follow State law. The issue, however, is not simply a question of choice of law between State and Federal statutes or defining an ambiguous term found in a Federal regulation as counsel proposes.

            The Commonwealth of Kentucky defines a “well” as any “bore hole drilled or proposed to be drilled for the purpose of producing natural gas or petroleum or one through which natural gas or petroleum is being produced.” Ky. Rev. Stat. Ann. § 353.010(19) (West 2012). It then goes on to define a “gas well” as any well that produces natural gas not blended with oil or producing more than 10,000 cubic feet of gas to every barrel of oil. Ky. Rev. Stat. Ann. § 353.010(10)(West 2012). An “oil well” is defined as any well that produces at least one barrel of oil in conjunction with producing natural gas. Ky. Rev. Stat. Ann. § 353.010(14) (West 2012). The “Dictionary of Mining, Minerals, and Related Terms,” Second Edition, U.S. Dept. of the Interior, 1996 defines a “well” as a borehole sunk in the ground for the purpose of obtaining oil, gas, water etc. There is no separate definition of a gas or oil well in this source. 17 C.F.R. § 229.1205 (“Drilling and other exploratory and development activities”) separates the definitions of wells into categories depending upon their production. A “dry well” is one that cannot provide sufficient quantities to make completion as an oil or gas well economically justifiable. Similarly, Pennsylvania, West Virginia, Texas, Tennessee and Alaska, to name a few states, define oil and gas wells based upon productivity in terms of cubic feet of gas produced to the number of barrels of oil. (See generally, 58 Pa. Cons. Stat. § 502 (2011); W. Va. Code § 35-4-2 (2013); Tex. Nat. Res. Code Ann.§ 86.002 (West 1977); Tenn. Comp. R. & Regs. 1040-02-09-.04 (2013); and, Alaska Admin. Code tit. 20, § 25.990 (2013).

            Reading the various statutes and regulations as well as general discussions on dry wells and their reclamation, it becomes abundantly clear that wells in the general sense transition into oil or gas wells when a sufficient quantity of the mineral is found to make it economically worth the cost of completion of the well by installing ejection equipment and factoring in associated costs of production compared to market value. A well may have been categorized as “dry” even when a reservoir of oil or gas is present if the cost of completion outweighed the expected profit (or loss) at the time it was drilled. A dry well may be re-entered and re-completed many years after it has been labeled as “dry” when the market factors change – the price of the product goes up or the costs of production goes down due to better surveying techniques or lower equipment costs. Thus, relying on any one State’s terminology is misdirected. It could produce wildly differing definitions across the country causing more ambiguity and confusion. More significantly, however, it would impose upon MSHA, whose purpose under the Act is to protect the health and safety of miners, definitions based upon commercial considerations. The legislative purpose of Section 75.1700 is to prevent inundations of gas and oil in the mines which could lead to potential fatalities. Leg. Hist., Federal Coal Mine Health and Safety Act of 1969 (Comm. Print, 1970), pp. 83-84. Taking note of the fact that coal mines produce methane, some in great quantities, it is conceivable that a well labeled as “dry” could still produce a sufficient amount of methane to cause an inundation or other safety hazards and still be less than an amount commercially viable for production.

            I would surmise that there are other important considerations involved in crafting a definition of oil and gas wells to address the health and safety issues of concern to MSHA besides those I have mentioned herein. It appears to me that the matter should be addressed through either rule making proceedings or at the least through meaningful discussion between technical experts and regulatory authorities leading to promulgation of agency-wide informational bulletins or other directives providing the mine operators with a clear meaning of the terms used in this mandatory standard. Summary decision is not the appropriate vehicle by which to do so particularly with the paucity of facts and absent a well-reasoned and clearly stated proposed definition provided by the Secretary.

                        Fair Notice

            The Respondent’s position with respect to lack of fair notice is well taken. It has been stipulated that the wells were drilled between 1944 and 1998. Since 2006, there have been between 1,127 and 4,358 inspection days spent at these mines with no previous citations issued under this standard. By regulation, the mine and ventilation maps have been submitted and approved by MSHA’s district office every year with the same designations as they appear currently. It has also been stipulated by the Secretary that no advisory statements were provided to these mines advising them that the drill holes were considered oil or gas wells. The Respondent, in the absence of MSHA guidance, relied upon Kentucky’s statutes and the letter from the Commonwealth’s Commissioner of the Department of Natural Resources as the basis of their belief that the dry wells are not contemplated within the meaning of oil and gas wells. I find their reliance is understandable and reasonable and that the Secretary has not met her burden of proving fair notice was provided to Respondent that a different definition should apply. By the Secretary’s own admission, there is no definition of the terms. It would be patently unfair to hold the Respondent accountable 15 years later without warning for violation of a standard, the meaning of which the Secretary cannot articulate.

            The citations and orders issued for violations of mandatory standard 30 C.F.R. § 75.1700 in these five dockets must be vacated. The citations and orders issued under mandatory standards 30 C.F.R. § 75. 1200 and § 75.372 must also be vacated for the reasons set forth herein.

ORDER

            The Secretary’s motion for partial summary decision is DENIED. The Respondent’s motion for partial summary decision is GRANTED. I further ORDER

1. Citation Nos. 8502461, 8502462 and 8502463 in Docket No. KENT 2011-1580 are VACATED.

2.Citations Nos. 8502423, 8502424 and 8502425 in Docket No. KENT 2012-27 are VACATED.

            3. Citation Nos. 8502319 and 8502320 in Docket No. KENT 2012-446 are VACATED.

4. Order Nos. 8502375, 8502376 and 8502377 in Docket No. KENT 2012-861 are VACATED and this case is DISMISSED.

5. Citation No. 8502378 and Order Nos. 8502379 and 8502380 in Docket No. KENT 2012-661 are VACATED and this case is DISMISSED.

            The parties are further ORDERED to confer for the purposes of settlement negotiations. Should settlement not be reached within 30 days, they are directed to contact the court for the purpose of setting a hearing date.

                                                                                                        /s/ Priscilla M. Rae

                                                                                                        Priscilla M. Rae

                                                                                                Administrative Law Judge

Distribution:

Mary Sue Taylor, Esq., Office of the Solicitor, U.S. Department of Labor, 618 Church Street, Ste. 230, Nashville, TN 37219

Melanie J. Kilpatrick, Esq., Rajkovich, Williams, Kilpatrick & True, PLLC, 3151 Beaumont Centre Circle, Ste. 375, Lexington, KY 40514